Amid public furor over revelations that employees at a U.S. Department of Veterans Affairs (VA) hospital in Phoenix concealed a massive backlog of patients waiting up to a year for treatment, VA Secretary Eric Shinseki resigned. The hospital reportedly placed patients on a secret list to evade scrutiny by federal regulators who grant bonuses for maintaining short patient wait times. Whistleblowers have alleged treatment delays are to blame for the deaths of at least 40 veterans at the facility.

Reports of similar scheduling manipulations and patient backlogs at two dozen other VA hospitals nationwide have prompted a comprehensive review by the VA Office of Inspector General and a system-wide audit by the Veterans Health Administration. Findings from both inquiries thus far confirm many of the accusations about gross mismanagement and misconduct. The Pentagon has announced that it will review its own health care system.

Both the House of Representatives and the Senate have passed reform bills in the past week that would allow veterans to seek medical care outside the VA system if wait times are too long or if the closest VA facility is more than 40 miles from their home.

Linda Bilmes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy at Harvard Kennedy School, is a leading national authority on veterans and defense costs, as well as public finance and U.S. budgeting. Bilmes has written extensively about veterans issues and co-authored “The Three Trillion Dollar War: The True Cost of the Iraq Conflict” (2008) with Joseph E. Stiglitz, a Nobel laureate in economics. Bilmes spoke with the Gazette from England, where she is teaching at Oxford University, about Shinseki’s departure and the systemic challenges facing the troubled agency.

GAZETTE: Was Shinseki’s resignation appropriate given the findings of the VA Inspector General’s May 28 report and the May 30 audit summary, or was it a symbolic move designed to contain a political embarrassment before it did further harm to the Obama administration?

BILMES: I don’t think it was appropriate. My opinion is that General Shinseki did a very good job as the head of the VA. The fact that the VA has continued to have so many problems over the past few years, despite very strong leadership, confirms my view that the fundamental system at the VA is simply broken. The job of a VA secretary is to try to make the existing system work well, but in this case what we need is to overhaul the system itself.

GAZETTE: Beyond the scheduling delays, what are the most significant deficiencies at the VA today?

BILMES: The system is ill-suited to the needs of today’s returning veteran population. This VA system was set up a long time ago in a different era, pre-Internet, pre-all-volunteer force, and at a time when far fewer troops survived injuries. The wars in Iraq and Afghanistan have been fought by a small percentage of the population, many of whom have served multiple tours of combat. Fortunately, a much higher percentage of those who are wounded or injured can survive, but there is heavy demand on the VA because nearly half of the troops who are returning today are applying for disability benefits.

These claims are much more complicated than in the past. The average number of disabling conditions per claim is eight to 10, compared to three during the Vietnam era. This increase is due to several factors, including outreach by the VA, particularly in changing the culture so it’s acceptable to request disability benefits for mental health conditions. Also, with modern communications, most returning troops can find out what others who have similar medical ailments have claimed for. And medical evaluations and medical science have advanced so much over the last 30 years. The process of diagnosing specific medical conditions is much more sophisticated, and returning service members are being diagnosed with multiple problems.

A typical veteran coming back today has served a couple of tours of duty and may have a musculoskeletal disorder, which is the No. 1 item claimed; perhaps they are also diagnosed with partial hearing loss, with a skin disease, some kind of mental health issue, and other problems. But overall, nearly 50 percent of troops returning from Iraq and Afghanistan are eligible to receive disability benefits — and they are applying for them. This number of veterans applying for benefits has overwhelmed the VA system, both on the health side and the benefits side of the department.

The agency systems are overwhelmed because they are not designed to handle this kind of volume and complexity. The current system requires that, in order to get approved for benefits, a veteran submits a claim into one of the 57 regional VA benefits offices, and then each one of the disabling conditions listed on the claim has to be validated by a medical specialist in the VA health care system. So an individual frequently needs to get an appointment with several specialist doctors within the VA system to validate the different conditions listed on the claim. This is wildly complicated, considering that when the whole process is finished, the VA approves more than 90 percent of the claims. And then if those conditions worsen, as they inevitably do over time, the veteran has to file another claim, and it goes back through the system again. The consequence of this is that the Veterans Benefits Agency is unable to process this huge volume of claims coming in, leading to the claims backlog. At the same time, the Veterans Health Agency is overwhelmed attempting not only to serve all those who need immediate treatment, but also to diagnose and certify a vast number of veterans coming through the system, who need to be certified in order to qualify for their disability benefits.

To put this in perspective, the VA system is serving some 8 million people now; it’s the second-largest government health care system [after the National Health Service]. It has high satisfaction ratings, and it plays a major role in training the nation’s physicians. In many respects, it’s performing to a very high standard for a large number of people, but it simply wasn’t designed for this huge volume and complexity of claims. Over the past decade, the VA budget has nearly tripled from $60 billion to $150 billion and the VA has hired thousands of additional claims analysts, medical staff, and invested billions in IT solutions and staff training. The department has also had quite strong leadership, in my opinion, from General Shinseki and his senior team. Despite all this effort, the department is still facing a backlog of claims, plus nearly 25 percent of the claims are being appealed, a lengthy and expensive process. And the latest problems to come to light in Phoenix show that the medical side of the VA is also unable to cope with demand.

As I have been saying for many years now, the solution is to reform the whole system, beginning with radically simplifying the disability claims process. Instead of each individual veteran going through this enormously messy process, we should simply provide an exit medical examination to every veteran that is the mirror image of the extensive medical examination they receive on enlistment. Anything that’s documented that’s different at exit should be automatically approved and all new claims, such as mental health conditions, should be approved up front, with audits to detect fraud conducted within two years. This would reduce the burden on the veterans, simplify the system, and introduce common sense into the process.

GAZETTE: Some blame the VA’s problems on chronic mismanagement, while others say they’re the result of inadequate funding which has led to a shortage of physicians to provide care. What is at the root of this current scandal, and what steps does the next secretary need to take to begin to fix the department?

BILMES: One of the root problems is the lack of coordination between the Department of Defense [DoD] and the VA when troops come home. Returning service members are still within the military, and it is only after they are discharged that they can apply to become “service-connected” to the VA. But to date, more than one million returning troops have been treated in VA medical facilities. And if they want to continue to receive care from the VA, in most cases they need to apply for disability benefits from the VA. However, if they received medical treatment during their years in military service, quite often those records are not being shared with the VA, or not in a form that is translatable to the VA system.

There is a limit to how much the VA secretary can do without the Pentagon. Despite the fact that General Shinseki was a four-star general and he was able to improve the relationship between the VA and DoD compared with previous eras, it’s still not possible [for] a VA secretary to force the Defense Department to change its way of doing things. No VA secretary is going to have the authority to harmonize these systems. The lack of coordination has been a problem for every VA secretary for decades. But the scale of demand right now has pushed the whole thing into crisis, which may get worse, because there are hundreds of thousands of troops who will be discharged in the next few years. I believe that President Obama needs to take the lead. The president should establish a commission to consider major reforms to the structure of how military members receive medical care and disability compensation during and after their service, which seeks to streamline the transition and to radically simplify the VA disability claims process.

On the topic of money: You couldn’t possibly criticize General Shinseki or the president for not having sufficient funding. They nearly tripled the budget at the VA, and Congress is still trying to throw more money at the problem. The question is how do we spend those funds most effectively? For example, many of the returning troops are going home to rural communities and to places where there are shortages of specialist medical personnel, not only doctors, but nurses, technicians, diagnostic specialists, etc. So under the current system, the VA needs to hire medical specialists in thousands of facilities across the country, but how do you fill the jobs all across the country in some of these fields when you have low numbers of people who are qualified? Try and find psychiatric triage nurses, for which there is a very high demand, anywhere. There’s a real shortage, and just increasing the pay (which has been done) has not been sufficient. It would be more efficient, and better for the veterans, to allow the VA to reimburse for medical treatment anywhere rather than making veterans wait for their claims to be certified by doctors who are employed by the VA. This happens to some extent, but it’s still the exception rather than the rule. Congress, as usual, has taken a rather lazy approach to this. Rather than doing the hard work of saying that the structure of the system needs to be seriously reconsidered, it has just said, “We’re just going to throw more money at it.”

GAZETTE: You’ve written and spoken about the unprecedented demands that veterans from Iraq and Afghanistan will place on the VA system. Why does this group require more services than those from prior conflicts?

BILMES: Several reasons: a higher survival rate; longer tours of duty; shorter dwell times; a higher propensity to seek treatment for mental health conditions (about one-third of the claims contain some mental health component); more knowledge of the system and technology; more outreach from the VA. And the all-volunteer force is a more contractual relationship than we have had with our troops in previous wars. Part of the contract with those who serve today is that if you have this set of injuries, these are the compensatory benefits that you will be entitled to. We the taxpayers have agreed to this bargain.

Another issue is the retirement structure in the military. Under the current system, service members don’t earn retirement benefits unless they stay in the military for 20 years. But nearly 90 percent of current troops leave the military before 20 years are up. So for many individuals who have served less than 20 years, disability compensation has become a sort of substitute for retirement benefits. Men and women come back home after having served two or three tours and they’ve given up a number of years of their life and their careers, and they may feel that they don’t have much to show for it in terms of financial benefits. And so they are going to claim for what they’re entitled to. Why not? All the incentives point toward filing these claims. This is another topic that the presidential commission ought to examine.

GAZETTE: Does the federal government have an accurate sense of how much the care and benefits for these veterans will cost over the coming decades?

BILMES: My own estimates — which have been proven too low ― show that the present value of the cost of providing medical care and disability compensation to current Iraq and Afghanistan veterans will be between $700 billion and $900 billion. These numbers keep rising. In 2008, Joe Stiglitz and I predicted that between 39 and 41 percent of veterans would be receiving disability benefits by now. In fact, it’s almost 49 percent. And the actual amount of the benefits has been higher. The Congressional Budget Office and other organizations that track these things tend to look over a 10-year horizon, but the big costs for veterans always kick in at the end, just as medical costs for all of us tend to go up later in life.

We’ve looked at previous wars, and we know that the peak year for paying veterans’ benefits for World War I was 1969, and the peak year for paying veterans’ benefits for World War II was in the mid-1980s. We haven’t yet reached the peak year for paying Korean and Vietnam veterans. I have proposed and testified on numerous occasions that we should set up a veterans’ trust fund to set aside money to pay for these promises. We know that for every dollar we appropriate for war, we will inevitably require another 25 cents or more to care for the veterans from that war. I think that if we added a veterans’ surcharge to war appropriations to go into a trust fund, it would more accurately reflect the true cost of war. Congress says “What a wonderful idea,” but no one’s done anything about it.

World Focus correspondent Mark Litke and producer Ara Ayer travel to Vietnam to report on the long term impacts of Agent Orange/Dioxin on the Vietnamese land and people. This video report was part of their series on New Vietnam.